Thursday, November 28, 2013

Stranger than Fiction: The Canadian Security State

The G20 strikes again.

So many issues arising from that summit.  The immense cost combining absurd ostentation (fake lake) with the very poor optics of giving massive tax-funded infrastructure improvements to battleground ridings, the arguably unconstitutional Provincial legislation, the inappropriate police conduct...

...there's no doubt that the litigation from the G8/G20 summit will continue for years to come.

I would never argue that we shouldn't host international summits, but if we're going to do it, we have to do it right.

The most recent scandal, however, could be a very dark one.  CBC reported yesterday on documents leaked by Snowden which speak to NSA operations during the G20 summit, apparently in concert with "the Canadian partner".

The consensus appears to be that the "Canadian partner" refers to the Communications Security Establishment Canada, or "CSEC", Canada's own equivalent to the NSA.  The specifics of the operations embarked upon are still a bit vague, but given what we know of those organizations, the reasonable inference is that we're talking about communications interception.

What Do We Know?

The reality is that we don't know much.  From CBC's reporting, we know that the NSA's plans were "closely co-ordinated with the Canadian partner".  CBC describes the briefing notes as making it clear that CSEC's cooperation "would be absolutely vital to ensuring access to the telecommunications systems that would have been used by espionage targets during the summits."  Further, while the NSA noted that there was no specific credible threat of any known terrorist organizations targeting the event, one of the objectives of the operation is identified as supporting "U.S. policy goals".

So What?

Well, there are a few problems with electronic eavesdropping in Canada.  Namely, without specific legal authorization, such as a warrant or the consent of the intended recipient of the communications, it's a violation of the Criminal Code of Canada.

Without a warrant, therefore, it is generally illegal for CSEC to hack the phones or computers of people in Canada.  But we're talking about the NSA conducting the operation, with CSEC what does that mean?

CBC quotes law professor Craig Forcese as saying this:
If CSEC tasked NSA to conduct spying activities on Canadians within Canada that CSEC itself was not authorized to take, then I am comfortable saying that would be an unlawful undertaking by CSEC.
This is a very fair and accurate statement.  Note the "if", of course - he was very careful about that.

Professor Forcese has published his own article on the topic, here, explaining that this is a five second excerpt from a 20-minute conversation, and highlighting that he isn't assuming that there was any violation of Canadian law, because we don't yet know enough to reach that conclusion.  Fair and cautious, but he does rank certain probabilities in ways that I question.  And I might question one very narrow legal proposition he advances.

I encourage you to read his article, but I'll briefly sum up his position.  Basically, he thinks there are three possibilities:

(1) The NSA unilaterally conducted its own activities outside of Canada in support of security at the summit, or intercepting the "non-Canadian" side of conversations between people in Canada and third party states, and shared this information with CSEC.  Professor Forcese feels that this is the most probable scenario, and also uncontroversial, raising no concerns in respect of Canadian law.  "[I]f Canada neither sought nor requested intercept of communications that had a Canadian nexus or link, I don't see how the information sharing itself is legally doubtful."

I have some concerns about his analysis, but I will touch on them below.

(2) The NSA conducted its activities within Canada.  Without Canadian consent, this would be a violation of Canadian sovereignty.  With Canadian consent, this raises some complex legal issues - Professor Forcese has an excellent analysis of the point, which I won't reproduce here, but the bottom line is that without a judicial warrant, such activities would almost certainly be unlawful, and...
I have a lot of difficulty imagining CSIS coming to Federal Court and persuading a judge to authorize spying done by or in part by a foreign intelligence service operating in Canada and targeting foreign leaders at an international conference, in order to gather information on, say, negotiating positions so that NSA can support US policy objectives.  That is a whole lot of bridges to cross.
I agree wholeheartedly with this analysis.  I would add that the odds of a judge authorizing interception of communications of other delegations - which seems to be implied by the reporting - are close to nil:  Intercepting diplomatic communications is a big no-no.

However, Professor Forcese describes this scenario altogether as "improbable".

(3) The third possibility is a hybrid, that there was some out-of-country surveillance coordinated with narrow judicially-authorized surveillance within Canada.

My Analysis

I haven't seen the documents myself.  It appears the Professor Forcese may have, so it puts me at a disadvantage.  I'm left to draw inferences based on Professor Forcese's and CBC's description of the contents of the documents, and these descriptions do not appear to be consistent in all ways.  But I have to question the probability of some of the assumptions Professor Forcese built into scenario 1, and some of his conclusions.

I agree with Professor Forcese on the possibilities, because our knowledge is incomplete and highly imperfect.  I'm looking at third party reporting (which is often imperfect) of the language and implications of briefing notes (which might not be 100% accurate on their face either).  But to the extent that a theory appears to be inconsistent with what we think we know about the briefing notes, I think it's a stretch to call the theory 'probable'.

Firstly, it isn't clear how one could reconcile the CBC's assertion that CSEC's assistance was "absolutely vital" to the NSA operation with the proposition that all the intelligence gathering was outside of Canada.  Yes, CSEC has some impressive capabilities, but I hardly think that the NSA would be at CSEC's mercy when trying to hack the telecommunications infrastructure of countries outside of Canada.  Secondly, the characterization of CSEC's cooperation appears to be completely inconsistent with Professor Forcese's supposition that they passively received information from NSA.  Thirdly, it is not at all clear to me why one might think it probable that interception would be limited to the "non-Canadian side" of a conversation, nor that this would make it 'okay'.

If I, in Canada, have a conversation with somebody in Portugal, and the NSA has tapped the line in Portugal, it is inconceivable that they might only listen to the Portuguese side of the conversation.  Even with emails or text messages, it's pretty hard to imagine that they're looking at one person's side of the conversation but not the other.  If you put it into a context that makes sense, in a "News of the World" kind of way, that they're hacking one person's voicemail in a game of phone tag, then hacking the Portuguese end would mean that they're listening to my side of the conversation.

But while Professor Forcese is completely correct to say that we can't control what the NSA does in other countries, that doesn't mean it wouldn't raise issues in terms of Canadian domestic law (such that CSEC involvement would be very deeply problematic).  The Criminal Code provisions dealing with interception of private communications deal with any communications originating in Canada or intended to be received by a person in Canada.  International law regarding jurisdiction can be a little blurry, but Canada has taken a particularly expansive view of the authority to prosecute for an offence.  (The law school example is that a person in Canada calls a person in the United States and cons them into sending money to a recipient in Mexico.  Under the Canadian viewpoint, any one of the three countries would be entitled to prosecute the offender.)  Accordingly, if somebody bugs the line of my Portuguese friend and eavesdrops on our conversation, this would violate Canadian criminal law, opening up the eavesdropper to the prospect of prosecution in Canada, even if they've never set foot here.

(If we're talking about legally-authorized interceptions in the place in which the interception takes place...that might get more complex.  But when we're talking about NSA operations overseas, that's less likely to be the case.)

My Conclusion

It's difficult to reconcile CBC's reporting of the documents with scenarios 1 or 3.  CBC could be wrong - wouldn't be the first time the MSM has gotten the details materially wrong - but scenario 2, disturbing though it is, doesn't seem so unlikely to me.

We know that, especially since 9/11, the U.S. has basically taken the approach that national security trumps all other concerns, including foreign sovereignty.  As Professor Forcese himself has noted before, and as many other commentators have argued in respect of the various revelations resulting from Snowden's leaks, peacetime spying is not at all uncommon, especially in context of summits.  Everyone does it, and everyone knows that everyone does it, despite the fact that it's ostensibly controversial and raises potential legal issues.

Canada still has a good relationship with the U.S., including sharing a great deal of intelligence information.  It would be fairly shocking if the NSA were spying here without Canadian consent, not so much because of the sovereignty concerns as because of the close military and intelligence ties that spying could alienate.

So yes, the NSA was always going to spy on the G20, and they were going to get Canadian cooperation to do so.  Partly because, if CSEC said no, the NSA would probably do it anyways.  It's very much illegal, and highly disturbing, but it isn't at all surprising.

And if that's what actually happened, then - politics and diplomacy aside - rule of law demands prosecution of those Canadians who were party to any NSA espionage activities targeted at persons within Canada.

There are limits to what can be permitted in the name of national security.  Warrantless communications interception within Canada, if that's what happened, is well beyond those limits.

Tuesday, November 26, 2013

Bill 168: OLRB Finally Refuses to Follow Investia

For over two years now, I've been posting a series of entries on the Ontario Labour Relations Board's early interpretations of the harassment provisions of Bill 168, and in particular the OLRB's leaning toward finding that it does not have jurisdiction to consider a reprisal application under s.50 of the Occupational Health and Safety Act based in allegations of employer reprisals for complaints of harassment in the workplace.

I've been highly critical of the approach that the OLRB took in the Investia decision, back in September 2011, and ever since then I've closely followed the developments in the doctrine - or the lack of development, as the case may be.  At long last, however, Vice-Chair Nyman released a decision this past Friday which expressly refused to follow the line of reasoning from Investia.  This stands as the first conclusive decision by the Ontario Labour Relations Board that it has jurisdiction to consider reprisal allegations rooted in a harassment complaint.


Most Ontario employers are now required by the Occupational Health and Safety Act to implement a policy and program for complaints of harassment in the workplace.  And the core question in the Investia line of cases, simply, is this: If an employee makes a good faith complaint of harassment in accordance with the program, can the employer turn around and engage in reprisals against the employee (i.e. fire the employee) in response to the complaint without offending the Act?

Investia suggested that the question should be answered in the positive:  So long as the employer implements the required policy and program, it has complied with its statutory obligations regarding harassment.  What it does after that is outside the Board's jurisdiction to second-guess.

I argued that this was wrong.  And I so argued repeatedly, in at least eleven entries, over two years.  I'll walk through the history briefly, and link all the entries, for anyone who really wants to get a more full appreciation of the background.

I first posted about Investia on November 18, 2011.  On that same day, another related decision, Ludlow, was released, which followed Investia.  I posted about that on November 24, 2011.  Ludlow seemed to settle the issue, at least until it could be dealt with by the Divisional Court.  But in January 2012, the PPL decision was released, which appeared to treat the question as still being open, but dismissed the case on other grounds.  I posted about PPL on January 11, 2012.  On January 26, 2012, I posted about the Carpenters case, where the Board determined that the Investia doctrine didn't protect an employer who lacked the statutory mandatory policy and program.  My next entry on the topic was February 27, 2012, after being quoted in a Law Times story on the topic.

On May 7, 2012, I posted about the Citi Cards decision, which still didn't conclusively answer the question, but at least stated conclusively that the question hadn't yet been answered (i.e. by Ludlow).  (City Cards involved a request by the employer to dismiss the application at a preliminary stage, which the Board declined.  The case later settled, meaning that there was never a consideration of the case on its merits.)

On July 17, 2012, I posted about another interim decision, in the Blue Line case, declining to answer the question one way or another.  Blue Line was later dismissed on other grounds, which I commented on in my August 27, 2012 entry.

On October 5, 2012, I posted about a couple more decisions, including the Craiglee decision and the Windmill decision.  The Windmill decision was concerning because it began a trend of following Investia as if it were now a binding authority, without further commentary on the principles.  The same thing happened in AGF, which I posted about on November 12, 2012.  Craiglee was again dismissed on other grounds, and while I was originally critical of the reasons, a later reconsideration decision admitted the flaw in the reasons I had identified, and corrected it (while still dismissing the application).  I posted about the reconsideration decision on July 9, 2013.

In a nutshell, following Investia and Ludlow, there were three types of decisions:  Decisions that followed Investia without further comments (AGF and Windmill); decisions that commented that the question wasn't yet resolved but were disposed of on other bases, and decisions that declined to dismiss the application on preliminary grounds, but never went (or at least, haven't yet gone) to a full hearing.

The New Development:  Ljuboja v. The AIM Group Inc.

(This case has now been posted on CanLII:  Click here for Vice-Chair Nyman's reasons.)

Strictly speaking, this decision, too, is preliminary.  But Vice-Chair Nyman went further than, for example, Alternate Chair Gee in Citi Cards:  Rather than simply saying that the question hasn't been decided so the matter should go to a hearing, Vice-Chair Nyman went so far as to outright reject parts of the Investia doctrine.

48. In paragraphs 14 and 15 of Investia, supra, the Board reasons that because the Act does not obligate employers to provide a harassment free workplace the Board has no jurisdiction or ability to inquire into an allegation that a worker was terminated because he or she made a harassment complaint to their employer.  With the greatest respect, I accept the applicant's argument that this analysis is flawed because it fails to consider the distinction between, on the one hand, complaining that the employer has failed to provide a harassment free workplace and insisting on that substantive outcome and, on the other hand, complaining that the employer has failed to comply with its obligation to provide a policy through which workers may make complaints about workplace harassment.  While employers are not obligated to provide the former, employers are obligated to provide the latter.  It appears from the reasons in Investia, supra, that this argument was not made to the Board in that case and therefore was not considered as part of the Board's reasons.

49. Accepting, as I do, that the Act requires employers to have an internal process for addressing instances and complaints of workplace harassment, it would entirely undermine that process if an employer is free to terminate a worker because he or she brought forward a complaint of workplace harassment in compliance with that process.  An interpretation of the Act that finds employers are obligated to create and maintain a policy by which workers may bring forward complaints of harassment but are nevertheless free to terminate, or otherwise penalize or retaliate against, any worker for having actually made a complaint under that policy is, in my view, untenable.  To interpret the Act in this manner would be to strip the employer's obligation to have a program to implement their workplace harassment policy through which workers may complain of any meaning.  Surely the Legislature did not intend in subsection 32.06(2) to spell out the obligation on employers to include measures and procedures for workers to report incidents of harassment at their own peril?  Surely the Legislature did not envision that, in requiring employers to describe how they will "deal with" complaints of workplace harassment in subsection 32.02(2)(b), employers would be free to terminate the complainant merely because he or she had the temerity to complain about a course of unwelcome and vexatious comment or conduct?

50. An interpretation that allows employers to penalize or retaliate against workers who make a workplace harassment complaint would entirely undermine the procedural mechanism that the Act creates through which harassment issues can be brought forward in the workplace.  If workers can be terminated for making a complaint that the employer's legislatively imposed policy enables them to do, then only the most intrepid or foolish worker would ever complain.  In practical terms, there would be no measure or procedure for making a complaint of harassment.  Moreover, the occupational health and safety value...that caused the Legislature to impose this obligation on employers would be eviscerated.

51. The corollary to this is that a worker who makes a workplace harassment complaint to his or her employer is seeking the enforcement of the Act because the worker is seeking to have the employer comply with its obligations to enable the worker to make the complaint.  Alternatively the worker is acting in compliance with the Act by accessing the statutorily prescribed mechanism by which they are able to bring forward complaints of workplace harassment to their employer.  Either way, the worker is seeking enforcement of the Act or acting in compliance with the Act, thereby bringing them within the ambit of the protection of subsection 50(1) of the Act.

52. The alternative is to interpret the Act as requiring employers to do no more than create a workplace harassment policy and post it in the workplace.  I am unable to find that that is all Part III.0.1 obligates employers to do.  First, such an interpretation is entirely devoid of any health and safety purpose and thus does not accord with the general rule of statutory interpretation.  Putting a paper on the wall with an illusory policy has no utility or effect in the establishment of minimum occupational health and safety standards.  [Bold emphasis is added; Italic emphasis is in original]
Temerity.  What a great word.

Vice-Chair Nyman proceeds to conclude that the statutory language requiring the 'implementation' of the policy "must include some active steps in carrying out the policy or giving effect to it."  Therefore, the Act actually obligates the employer to comply with its own policy, leading to the conclusion that when an employee makes a complaint, this is standing on a right under the Act.  While he circles back to the same point in a few different ways, I think this is the best illustration of it:  The bottom line is that the Act does not stop at requiring an employer to post the policy; the Act requires the employer to follow the policy, and a request that they do so triggers the Act's anti-reprisal protection.

While there is more to be said about the decision, that's the most important take-away:  The question is whether or not the Act prohibits reprisals against workers for making harassment complaints.  The answer is yes.  "I decline to follow Investia, supra, to the extent that it stands for the proposition that the Act does not prohibit employers from penalizing or retaliating against workers for making a complaint about workplace harassment under the employer's mandatory policy."

Where the Decision Stops

Vice-Chair Nyman did not fully disagree with Investia, however, concluding that it correctly decided that the Act does not impose a substantive obligation to keep a harassment free workplace.

I still disagree with that.  I would argue that the minimalistic statutory requirements give employers a great deal of flexibility in how they approach harassment in the workplace, but in light of Bill 168 - as I have said before - it is incoherent to continue to view harassment as not compromising health and safety.

The Board's observations about the potentially-immense scope of such an obligation are not misplaced, but my view is that there are further nuances to be drawn - a 'standard of care' issue, if you will.  In general, when a physical hazard causes serious injury, employers are held to a pretty high standard, and it's pretty rare for them to not be held responsible for failing to proactively recognize and resolve the circumstances that led to the injury.  I would probably argue that it will be somewhat easier for an employer, in the right circumstances, to say that they had no reason to believe that further preventative measures were necessary.  If I'm harassed by a co-worker, but I never complain to management, and management never observes the harassment, then the employer can't reasonably be expected to act to resolve the issue.  (It isn't unlike the framework for employer responsibility for harassment on the basis of prohibited grounds under the Human Rights Code:  If management isn't part of the harassment, and reasonably doesn't know about the harassment, they aren't liable for it.)

(Note:  I would not argue that harassment triggers the right to refuse unsafe work.  That particular right specifically addresses physical hazards, and now the risk of physical violence.  It couldn't ever encompass harassment, simpliciter, nor should it.)

But the question of substantive obligations isn't particularly important in this context, in large part because it's outside the scope of s.50 anyways.  It's not a reprisal issue.

So there are distinctions to be made here, on the face of the decision.  Saying "I was harassed, I complained, and they kept harassing me" isn't going to sustain a reprisal complaint.  Nor will "I was harassed, I complained, and they ignored me".  These are both very different from "I was harassed, I complained, and management harassed me more because of my complaint".

(1) If an employer fails to create or post a mandatory policy, and the employee complains about the lack of a policy, and the employer penalizes the employee for it, this may give rise to remedies under s.50 of the Act.

(2) If an employer implements the mandatory policy and program, and then penalizes an employee for utilizing the process made available by the policy, this may give rise to remedies under s.50 of the Act.  (This is the core question in this case, and the most important question in the Investia line of cases)

(3)  However, if an employee makes a complaint under the policy, and is not satisfied by the investigative process or the outcome of the investigation, this does not give rise to remedies under s.50 of the Act.  I do not disagree with this; it is uncontroversial.  But even on the face of this decision, there may be other remedies.

If, as Vice-Chair Nyman found to be the case, the Act imposes an obligation on the employer to comply with the process set out in its own policy and program, then the failure to do so still violates the Act.  It isn't a reprisal, and so s.50 would be the wrong process.  But, assuming Vice-Chair Nyman to be correct, it would be well within the jurisdiction of the Ministry of Labour's enforcement powers to remedy (though I suspect that getting the MOL to address such matters will be a whole other battle), may be implied into collective agreements and be appropriate subject matter for a grievance, and may bolster civil employment-related claims in non-union contexts.

Of course, I would go a step further and say that a substantive failure to meaningfully address workplace harassment likewise violates the Act.  But again, it wouldn't be appropriate subject matter for a s.50 complaint.

Other Notes

There are a number of interesting remarks in Vice-Chair Nyman's reasons.  Despite the fact that the decision ultimately doesn't go as far as I might argue, much of the logic echoes my own.  For example, consider the following passage from paragraph 41 of the decision:
On the other side, having imposed minimal explicit procedural requirements and no requirements regarding outcomes, some argue that the Legislature placed an unnecessary burden on employers and granted a hollow right to workers.
This very closely mirrors my initial critique of Investia from November 18, 2011:
It would require employers to incur the expense of developing policies, without contributing to employee protection in any meaningful way.
The above observation by the Vice-Chair is made in context of walking a fine line:  On the one hand, principles of statutory interpretation lead towards purposive interpretations, designed to give effect to the intentions of the Legislature and to avoid absurd results.  An argumentum ad absurdum - arguing "If you interpret the language this way, absurdity results" - is a legitimate argument when dealing with statutory interpretation.  On the other hand, the OLRB's jurisdiction is defined by the language used by the Legislature, and it is not the OLRB's role to rewrite legislation to make it better policy.  As the Vice-Chair put it at paragraph 39, "The wisdom of legislatively mandating a process with minimal explicit procedural requirements and no obligation with respect to outcomes is not an issue for the Board to comment on."  (Incidentally, in literary contexts, this is referred to as "preterition".  Though I note that the word has a different meaning in law.)

Finality:  I should note that even I would be reluctant to conclude that this decision finally settles the issue.  However, it is a well-considered decision to depart from the Investia doctrine, which I expect the Board to follow (for the most part), and which I hope and expect will stand up to judicial review.

As a closing note, I would also congratulate the applicant's counsel, Wade Poziomka, of the Hamilton firm Ross & McBride LLP, on a good win on an issue of importance.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Monday, November 25, 2013

Court of Appeal Upholds Cumming Dismissal

In March, I made an entry about a police officer, Mr. Cumming, going to Court with a "Duty of Fair Representation" complaint against the police association.  The Superior Court, following a Court of Appeal decision in the prior Renaud case, dismissed the action, concluding that he should have grieved the alleged DFR instead.  I expressed some concerns with the doctrine.

Mr. Cumming brought an appeal to the Court of Appeal for Ontario, and the appeal was recently dismissed.  The primary basis is that the Court felt that Mr. Cumming was attempting to argue that Renaud was wrongly decided, and had not met the procedural requirements for mounting such a challenge:  Put simply, the appellant should have requested a five-judge panel, and failed to do so, and therefore the court was unable to consider whether or not Renaud should be disregarded.

However, the decision also hints that they doubt the merits of Cumming's argument in the first place:
We would add that this collective agreement gives the respondent the exclusive power to bargain on behalf of the members, of which the appellant is one. The Supreme Court of Canada in Canadian Merchant Service Guild v. Gagnon1984 CanLII 18 (SCC), [1984] 1 S.C.R. 509, held that this type of exclusive power includes a corresponding obligation on the union of fair representation of all employees in the bargaining unit. We therefore reject the appellant’s submission that the duty of fair representation is not encompassed in this bargaining relationship.
This is something of an oversimplification of the principles at issue, and the language of 'bargaining relationship' is imprecise.  I would agree that the DFR is encompassed in the bargaining relationship.  I take no objection to the proposition from Gagnon that the exclusive power to represent comes tied with a corresponding obligation to represent fairly.  But neither one of those propositions leads to the conclusion that arbitrators have jurisdiction, under the collective agreement, to hear grievances filed by individual employees.

Here's the core issue:  The exclusive power of the Association to bargain on behalf of its members does not arise from the collective agreement, but rather arises by operation of statute.  This, fundamentally, is the point which I made in my earlier entry:  The Duty of Fair Representation is prior to and supercedes the terms of the collective agreement; otherwise, a collective agreement could be negotiated with utter disregard to the DFR.  It is the very right to enter into an agreement on behalf of the employees that gives rise to the DFR in the first place.  (Hence why, under the Labour Relations Act, a DFR is nearly the only employee remedy that doesn't proceed by way of grievance.)

The decision in Renaud has created an anomaly:  See, for example, the Mauro grievance, where Arbitrator Snow sums up Renaud, explains why it has caused confusion, notes in passing that it was "an oral decision, released the day of the hearing", and highlights some of the intuitive problems with the Court of Appeal's interpretation:
The difficulty with conciliating and arbitrating a complaint about a violation of a union's duty of fair representation is this - the language of the Police Services Act does not appear to permit it.  The Act speaks of the parties - that is, an employer and a union - conciliating and arbitrating grievances which have arisen under a collective agreement.  So the Court...concluded that "party" had to be given a "broad and liberal interpretation" and that an individual can be a "party" in an arbitration in which the issue would be whether the union breached the implicit statutory requirement to provide fair representation.
In light of Renaud, therefore, arbitrators now have to see themselves as having jurisdiction to hear individual grievances based on allegations that a police association has violated the DFR.  It's awkward, it's unusual, there is virtually no question that they would have refused jurisdiction had Mr. Renaud gone that way instead of to the courts, and most importantly it's incoherent, because the subject matter of the DFR clearly extends beyond the statutory jurisdiction of arbitrators.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Thursday, November 21, 2013

Limitations Periods and Unpaid Bonuses

Picture this:  You are a manager, and have an employment contract which contemplates payment of bonuses, based on your performance and company sales, including a percentage of sales over a given figure.

In your first year, you get a modest bonus.  In your second year, no bonus.  In your third year, another modest bonus.  You never raise a stink about the bonuses, never check the sales data (you may not even have access to the sales data), so you really don't consider whether or not you might be entitled to an additional bonus.  You take your employer's payments at face value, in good faith.

Halfway through your fourth year, you get dismissed - unsurprisingly, no bonus.  22 months after your dismissal, you commence litigation against the employer, seeking close to $300,000 in unpaid bonuses based on the contractual formula.

But is it now to late to claim your unpaid bonuses from years gone by?

This is the issue in Benson v. Bird Mechanical Ltd.:  The employer takes the position that the bonus claims are statute-barred, because they would have been owing (assuming they're owing at all) at the end of each year of employment, more than two years prior to the commencement of the action.  It's unfair, says the employer, that an employee could lie in wait for so many years, never taking issue with the bonus payments, and then sue in summer 2012 in relation to, among other things, a bonus that allegedly was payable in December 2007.

Bird brought a motion to dismiss the claim for unpaid bonuses.  Justice Moore dismissed the motion, finding that Bird had failed to establish that there was no issue requiring a trial, and Justice Wilton-Siegel refused leave to appeal Justice Moore's decision.

Justice Moore's Decision

There were several problems with Bird's position, leading Justice Moore to dismiss the motion in August:

(1) The employment agreement indicated that bonuses would be paid, but did not specify the timing or frequency of payments.  Given that the employment agreement was drafted by the employer, it becomes difficult for the employer to assert a particular date at which the limitations clock would start running.  One might reasonably argue that the parties understood the payment to be payable at the end of each year, but that's not something amenable to a summary judgment, and perhaps more importantly there's more than one way of resolving contractual ambiguity.  This isn't directly touched on in the decision itself, but it would also be hard to believe that a payment calculated on the basis of annual sales might be due during the sales year.  Not only would the sales not yet have been calculated; they wouldn't even be complete.  On that basis alone, I'd say Benson has a leg to stand on when arguing that he always expected the outstanding bonuses to be calculated and paid at some later time.  (See below.)

(2) Benson claimed that he always expected the employer to calculate and pay his bonuses in good faith.  There was never any basis for him to think that Bird was failing or refusing to honour its bonus commitments which might warrant legal action - indeed, he neither appreciated that he had further bonus entitlements, nor that Bird was failing to pay them.

(3) Bird never provided Benson with access to sales figures for the calculation of bonus entitlements.  "[G]iven the special nature of the employment relationship at issue in this matter and the clear language of the bonus provisions in the employment agreement that Bird drafted, the failure to inform Benson of Bird's interpretation of the agreement and to provide him with the sales figures needed to appreciate his potential bonus entitlements amounts to a fraudulent concealment that prevents the running of the limitation period."

(4) This one is perhaps more morally persuasive than legally compelling, but it has some interesting implications that I will touch on later:  "It would have been neither workable nor fair to expect Benson to have jeopardized his job by suing for bonus while still actively employed by Bird."  This is supported by some of Bird's own evidence, that Bird "stopped short of saying that Benson could have sued for bonuses with impunity while still employed."

Justice Wilton-Siegel dismissed the motion for leave to appeal, releasing his reasons earlier this month.  He agreed with almost all of Justice Moore's analysis, that in light of the lack of clarity as to the timing the bonus was payable, the lack of clarity that Benson knew that no further bonus payments would be forthcoming or that he had unpaid bonus entitlements, and the unworkability of suing while still employed, there was no reason to doubt the correctness of Justice Moore's decision.

Furthermore, Justice Wilton-Siegel considered the issue to be very fact-specific, and not of legal issues of broad significance or general importance.  He does acknowledge that there are novel issues of law for consideration, but feels that it is best for such matters to be addressed at a full trial.

That last caveat, I fully agree with:  The impact of a continuing employment relationship on limitations periods for claims against an employer is an issue that could have wider impact, and I think there's are a lot of complex considerations in that light.

My Thoughts

Knowing You Should Sue

I'm generally on side with both decisions.  There are a few lines that set off alarm bells for me, however.  For instance, when Justice Moore wrote that "Bird has not demonstrated that Benson knew or ought to have known that he had a claim for unpaid bonus that Bird would not honour and that he needed to sue to recover upon that claim at any time sooner than he did in fact sue", it seemed a little off, at first glance.

It appears the Justice Moore is suggesting that, because Benson still expected to be paid, there was no reason to sue.  Such a proposition would ordinarily be wrong:  If I submit an invoice to you, and I expect you to make good on your debts, so I don't chase it too much except for the occasional follow-up call, where you tell me that you have a few big receivables that you expect to come in any time now which will allow you to pay the account, I might reasonably be able to say "I didn't expect to have to sue."  However, without certain conditions being met (partial payment, written acknowledgements of debt, etc.), your puffery about expecting to be able to pay me later does not extend the limitations period.  Indeed, the limitations period is pretty firm that way, and many people are surprised by this.  The fact that they didn't know about a limitations period, and took diligent efforts to collect on the debt, doesn't prevent a claim from being limitations-barred.

However, these facts are a bit more nuanced, because it wasn't just a matter of expecting the employer to make good on its debts, but rather to make good on its contractual obligations to assess the bonus payable in good faith and make payments on it in due course - in other words, that Benson had no basis to think the contract was being breached in any way that would generate a right to sue.

Suing While Employed

Far more interesting is the 'unworkability' of suing while still employed.  As morally compelling as the argument sounds, I'm not at all sure that it can stand as a general proposition of law that a limitations argument is foreclosed by a continuing employment relationship.

First of all, let's talk about the kinds of claims that typically arise while still employed:  You get injury claims against the employer, claims for unpaid wages or benefits, human rights violations, health and safety issues, and constructive dismissal claims.

Injury claims are almost universally covered by the WSIA, and are the exclusive jurisdiction of the WSIB, applying a distinct analysis in terms of process and time frames, independent of the Limitations Act.  Human rights claims are similar, being made to the Human Rights Tribunal in the time frames permitted by the Code.  There are now narrow circumstances in which a human rights claim can be made at court, but it requires that the claim be ancillary to another cause of action.  Aside from that, the Tribunal has exclusive jurisdiction.  Health and safety is dealt with through processes available under the OHSA.  Claims for unpaid wages typically fall under the Employment Standards Act framework, which again has its own timeframes for making claims, though the Ministry and OLRB do not have exclusive jurisdiction.

In all of those administrative tribunal processes, an employee is expected and required to raise the matter within a given period of time, and failure to do so - still employed or not - will usually be fatal to the claim.  There's a recognition of the vulnerability of employees commencing legal proceedings against their employers, in the form of statutory reprisal protection.  But none of the employment-specific administrative tribunals will be particularly persuaded by an employee saying, "I couldn't complain about this earlier because I needed to keep my job."

Interesting trivia:  The Employment Standards Act protects an employee's right to payment of bonuses, other than purely discretionary bonuses.  If there's an actionable claim for a bonus, then the odds are that the ESA protects it, and demanding/pursuing that bonus will likely incur the protection of the ESA's anti-reprisal clause.

It seems highly questionable, in my mind, that the Courts would follow a proposition that you need not act in a timely manner to pursue a claim against your current employer, when the Ministry of Labour and OLRB insist on that same claim  being made in a strict timeframe.

And there's a huge disconnect between such a judicial recognition of the impracticality of suing your current employer, with the bulk of the jurisprudence on constructive dismissal.  Not that I necessarily think this is a bad thing.  I've raised concerns before about courts telling employees that, following a constructive dismissal, the reasonable approach in many circumstances is to stay in the job and sue for your losses.

For example, see my commentaries on the Chevalier case, where a constructively-dismissed employee sued in wrongful dismissal and then was offered his job back, and the court found that he failed to mitigate by refusing to accept employment from the employer he was suing.  Also see my commentary on the Ghanny case, where the court discussed - by way of obiter - an employee's demands when offered his job back after commencing litigation:  The court considered it unreasonable for the employee to insist on his existing claims being paid, but unreasonable for the employer to insist on the existing litigation being discontinued - in other words, if you're offered your job back, the appropriate thing to do is to accept the job but still continue your law suit.

My point, altogether, has been that the courts fail to recognize that, for employers and employees, suing each other is a very big deal, which they don't enter into lightly, and leaves a bad taste in everyone's mouth.  (I've also pointed out that there's a bit of a "Fool me twice, shame on me" aspect to it - if you look at it outside the employment contract, most commercial actors are reluctant to do more business with someone they've had to sue in the past:  It seems quite absurd to tell a party, "Yes, we know that they breached your contract before, and continue to refuse to compensate you for that breach, but it's still unreasonable for you to refuse to enter into another similar contract with them moving forward.")

Furthermore, constructively dismissed employees have much bigger problems than the Limitations Act - failure to take action in a reasonable period of time may well have the result that they're deemed to have acquiesced to the changed terms and conditions of employment.

So on some level, I appreciate Justice Moore's recognition about the impracticality of suing your current employer - it's an accurate and down-to-earth assessment of the realities of the circumstances between the parties, and a welcome shift from the broken constructive dismissal doctrines.

And it might reasonably inform the question of whether or not Mr. Benson ought reasonably to have known about the cause of action, addressing the reasonableness of an employee failing to investigate whether or not he's being ripped off.  So I think that, all things considered, Justice Moore's decision is very reasonable.

But, simply put, a continuing employment relationship cannot be a stand-alone ground to argue that the limitations period hasn't started running for existing causes of action.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wednesday, November 20, 2013

Pate v. Galway-Cavendish and Harvey: Yet Another Chapter

Mr. Pate was wrongfully dismissed in March 1999.  Yes, you read that correctly:  This was nearly fifteen years ago.

And the litigation's still going.  Mr. Pate has since passed away, but his Estate carries on.

I've commented about the case several times in recent years, with fulsome descriptions of the facts, which are linked below.  But for the purpose of this entry, allow me to say simply that Mr. Pate was treated very unfairly:  A new supervisor accused him of having defrauded the Township, fired him and pressed criminal charges when he refused to resign, and then withheld exculpatory evidence from the police.  Nonetheless, Pate was acquitted, and sued in wrongful dismissal and malicious prosecution.

The Background

At trial in 2009, Pate was awarded wrongful dismissal damages, but the 'malicious prosecution' claim was dismissed, and the trial judge felt that he was constrained to a very modest award of punitive damages of $25,000.

In April 2011, the Court of Appeal allowed Pate's appeal, for a new trial as to malicious prosecution and punitive damages.  I described that decision here.

In November 2011, Justice Gonsolus awarded $550,000 in punitive damages.  (My commentary here.)

And in December 2012, Justice Gonsolus released his decision on malicious prosecution, finding that the cause of action was made out, and awarding the nominal damages (and costs) agreed upon by the parties.  (My commentary here.)

Earlier this month, the Court of Appeal released its decision on the appeals from those two decisions.  It's a long decision, with a strong dissent.

The New Court of Appeal Decision

Put briefly, the Court was unanimous in agreeing with the trial judge's disposition of the malicious prosecution action, but divided on the issue of punitive damages.  The majority concluded that the trial judge had failed to consider whether or not a lower punitive damage award would satisfy the objectives of punitive damages, and that the award was too high.  In particular, the Court considered the facts of this case to be roughly comparable to the facts of an earlier case, McNeil, where $500,000 had been awarded, and notwithstanding that the trial judge considered the conduct in this case to be worse than that in McNeil, the majority disagreed.  (Food for thought:  Doesn't this constitute a question of mixed fact and law, attracting appellate deference?)  The majority accordingly held that the $550,000 award was excessive, and reduced it to $450,000.

This is a surprising result.  There are certain types of damages that are not 'exact sciences', where there may be a range of reasonable results, and so long as the trial judge's conclusion does not stand outside that range, the appellate courts are reluctant to 'tinker'.  (Consider the Minott v. O'Shanter case, where the Ontario Court of Appeal considered the reasonable notice period to be a little on the high end, but found that correcting it would amount to "unwarranted tinkering".  Likewise, in the Whiten v. Pilot Insurance case, which stands as the leading case on punitive damages and the high watermark for reprehensible misconduct, the Supreme Court of Canada restored a jury award of a million dollars in punitive damages despite clearly considering it to be at the very high end of the reasonable range.)  For the Court of Appeal to say that $550,000 is clearly too high, but to find that the reasonable award is $450,000...suggests that the trial judge's award was no so unreasonable in the first place.  (To be fair, the Court of Appeal points out that $50,000, being the difference between McNeil and the trial judge's award, isn't chump change.  True - $50,000 or $100,000 is a great deal of money.  But in this case, it isn't exactly a difference of scale.)

Sean Bawden, in his blog, has raised concerns with the Court of Appeal's characterization of the purpose of the compensatory damages.  I fully agree with his comments on the topic:  The Court was right to consider that punitive damages need to bear in mind the scope of compensatory damages for which the defendant is already liable, but to suggest that compensatory damages are in any way intended to my humble opinion it is a distortion of the law.

The Dissent

Justice Lauwers, in a well-considered 181-paragraph decision, considered the trial judge to have gotten it right, or at least close enough.  He candidly states that, if he were in the trial judge's shoes, he wouldn't have characterized the case as worse than McNeil...but he considers the two cases to be very similar, and doesn't think that the difference between $550,000 and $500,000 warrants appellate intervention.

Justice Lauwers also noted the agreement by the parties on nominal malicious prosecution damages, reading the agreement as an implicit recognition that a finding of liability on malicious prosecution could support the plaintiff in responding to the appeal - already commenced at that point - of the punitive damages award.  (This was exactly the observation I made in the last paragraph of my December 2012 entry.)  The majority appears to disagree with Justice Lauwers' treatment of the malicious prosecution agreement, finding that a subsequent finding on a separate retrial "cannot save an otherwise irrational and excessive punitive damages award."

Is this the End?

After nearly 15 years of litigation for Mr. Pate and his family, including a criminal trial, a civil trial, two appeals, and two re-trials, at present it looks to me that Mr. Pate's overall take - including all damages and costs - is in the ballpark of $800,000.  But is it over?  What's next?

There's really only one thing to do:  Either party might apply for leave for appeal to the Supreme Court of Canada.  I doubt the Supreme Court would be interested in the malicious prosecution issue, but they might take the opportunity to comment on punitive damages.  A strong dissent at the Court of Appeal never hurts an application for leave.

Stay tuned.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wednesday, November 13, 2013

Hearings on Senate Reform

I discussed Senate reform, in some detail, a little over a year ago.  After myriad Senate scandals since, really whetting the public's appetite for meaningful change (though I believe Rick Mercer may be on to something when he suggests that the scandals could be avoided by appointing better Senators), the Supreme Court is finally hearing a reference on the matter.

We've long known that the Senate has major issues, though, and the scandals have just made that more obvious than ever.

There are basically three major camps among Canadians:  (1)  We should abolish the Senate.  (2)  We should reform the Senate to make it effective.  And (3) who cares about the Senate?  In light of recent scandals, #3 is getting much smaller.

Nonetheless, in reality the Senate does play a role - and sometimes an important role - in the legislative process.

There are certain changes that the Federal government can make unilaterally, but for changes that affect the fundamental character of the Senate, there has to be consultation with the Provinces.  Which the Federal government wants to avoid.  (Remember the Meech Lake and Charlottetown Accords?)  The Federal government will make no changes that require consultation with the Provinces.  And so the core of this reference is:  What can the Federal government do unilaterally?

There are a lot of issues in play, and early reports suggest that the Court is expressing some scepticism with the arguments posed by the Federal government's lawyers.  I want to start by focusing on Term Limits.

The question, at it's core, is whether or not imposing term limits would 'change the essential character' of the Senate.  You may recall that I suggested that the answer to that question is a firm 'maybe':
There is a cogent argument to be made that term limits may change the fundamental features of the Senate:  The House of Lords follows something of an 'independence model' like the judiciary itself - not elected, not subject to any external authority.  A Senator can vote his conscience, because he can't be removed, and this renders him immune to external political pressures.  Under the 1979 interpretation, I'd probably be inclined to bet on that argument.  Term limits - with or without elections - subject Senators to influence by the popular ideas of the moment, fundamentally shifting it away from the House of Lords model.  However, in 2012, I'm not so confident that the 'unaccountable' nature of the House of Lords will be a very persuasive model to the Supreme Court.
Justice Abella has already expressed concerns about the impact of term limits on the independence of Senators, suggesting that it would change the fundamental character of the Senate.  The Federal Government's lawyer, Mr. Frater, argued that it really didn't change much.
Frater maintained a term limit of at least eight years wouldn't appreciably shorten the amount of time senators currently serve before reaching the mandatory retirement age of 75.
I might (or might not) have been persuaded that the 'independence model' of the Senate is not an essential part of its fundamental character in 21st-century Canada.  How important is the 'unaccountable' nature of a legislative body?  In the 19th century, yes, it was seen as important.  But our constitution is a living tree; it evolves and grows.  And so do our legislative bodies, and the character of them.

But this argument?  It amounts to, "We're not really changing anything, so what does it matter?"  Which not only undermines the supposed importance of the reforms sought, but is also plainly untrue.

On the current crop of Senators, the average appointment age was under 58, leaving over 17 years before mandatory retirement.  More than double the proposed term limit.  There are only a handful who are not eligible to serve over 8 years, whose length of service would not be ostensibly shortened by such term limits.  And there are several whose mandatory retirement will not occur until the 2040s.  (Consider Senator Batters, appointed this year, whose mandatory retirement age will be reached in 2045, after over 32 years in the Senate.  If her term were only 8 years, then she would be required to seek reappointment or re-election four times in order to serve until the current mandatory retirement date.  How could this not affect her independence?)

Consultative Elections

The 'method of selecting' Senators is firmly entrenched in the constitution; it can't be changed without using the general amendment formula, requiring consultation with the Provinces.

However, the current method of selection is pretty much a unilateral appointment by the Prime Minister.  (Strictly, it's by the Governor-General, at the Prime Minister's advice.  The convention is well established.)  And there are no real criteria for these appointments.  The PM can appoint whomever he or she wants, on whatever basis he or she wants.  It strikes me as being within the PM's executive power to say "I will appoint to the Senate whomever lands the biggest trout in this fishing contest."  And likewise for elections - indeed, it's already done in some cases.

So I'm a little surprised that several members of the Supreme Court appear to have serious doubts about the ability of the Federal government to legislate consultative elections.

I understand their concerns - the constitution specifically speaks to the process for changing the method of selecting Senators, and this is clearly, to use Justice Cromwell's language, a "constitutional workaround".  But how do you tell the Federal government that they can't change how their unilateral discretion is exercised?  It's hard to rationalize.

I suspect the core is here, and if the Supreme Court rejects consultative elections, it will be on this basis:  Allowing the PM to willy-nilly appoint whomever he wants is one thing, but creating and formalizing a new system of appointments as a large-scale Senate reform something else entirely.

And in fact, I'm starting to think that the SCC is right to be sceptical:  What we're talking about is a piece of Federal legislation which would ostensibly bind the Prime Minister in how he appoints Senators.  Despite the distinction often being blurred, there is a very important difference between the legislative branch and the Prime Minister.  At present, the constitution essentially entrenches Prime Ministerial discretion in Senate appointments, and the Legislature is trying to co-opt that and tell the Prime Minister how to exercise his constitutionally-designated powers.

This appears to be the position taken by Ontario:  Consultative elections like those held by Alberta before are fine, because the Prime Minister is not bound by their results.  The Prime Minister is entitled to take advice at "an informal level, a non-statutory level, something that does not create public law."  But federally-run consultative elections would change the fundamental character of the Senate.

At the end of the day, if you look at this case from a 10,000 foot perspective, it's hard not to see the Federal government as trying to 'change the fundamental character of the Senate'.  Their whole position on the Senate is that the Senate is broken, the status quo is unacceptable, and major changes are needed.

Regional Representation

I should highlight that, to my knowledge, there is still no plan to fix the geographical distribution.  As I noted before, the east is drastically overrepresented in the Senate by any estimation.

I take an 'all-or-nothing' approach to Senate reform.  Fixing the regional representation is necessary for comprehensive and complete reform.  Reforming without doing so is irresponsible and dangerous, because it creates an effective legislative body that seriously disenfranchises the west.

We need to fix the Senate entirely, or to abolish it entirely, or to leave it be and just try to appoint better Senators.  But half-measures, in my mind, are not an option.

What about Abolition?

The government has made it clear that, if the Senate can't be reformed, it will be abolished.  Yet it's not so clear that this is necessarily an option, either.  Saskatchewan, which categorically supports abolition of the Senate, argues that the "7/50" formula is enough - which is difficult enough to achieve.  Other Provinces, and the territories, argue that all ten Provinces have to consent to the Senate being abolished.  It's hard to imagine that happening, honestly.  Even 7/50 would be a stretch.  I'm pretty sure the west would be on board, and probably Ontario, too, but east of Ontario it's less clear.  Quebec has always taken a bit of a confrontational approach to constitutional reform, because they feel slighted with how the patriation originally happened.  (Not without reason, either.)  As noted earlier, the east is hugely overrepresented in the Senate.  To the extent the Senate actually does anything, that's to the east's advantage.  And if reform is wanted, that overrepresentation is a valuable constitutional bargaining chip.  They would rather re-open the constitution and sell their bargaining chip, rather than unilaterally agree to a narrow constitutional amendment that gives away the bargaining chip.

A decision by the SCC is still likely several months away, but this could be interesting.

The political dimensions are also compelling.  To be honest, I'm not entirely sure that the government cares if it can't make the necessary reforms, so long as it can wash its hands of the whole ordeal and say, "See?  We tried!"  Harper has made a lot of use of his appointment power to the Senate; his principled objections to patronage appointments from his opposition days seem to have dissipated, but it's always nice to have somebody else to blame for failing to keep your election promises.  (Of course, if it were really that important, we could re-open the constitution.  But that's not going to happen.)